A Global Value Chain Perspective on Industrial Policy and Development in Emerging Markets

By Gereffi, Gary | Duke Journal of Comparative & International Law, Spring 2014 | Go to article overview

A Global Value Chain Perspective on Industrial Policy and Development in Emerging Markets


Gereffi, Gary, Duke Journal of Comparative & International Law


TABLE OF CONTENTS  I. GLOBAL VALUE CHAINS AND EMERGING ECONOMIES II. THE RISE OF GVCS III. GOVERNANCE AND UPGRADING IN GVCS IV. CONNECTING GVCS TO ECONOMIC DEVELOPMENT V. GVCS AND PRIVATE SECTOR DEVELOPMENT VI. THE HETEROGENEITY OF EMERGING ECONOMIES AND THEIR        EXPORT PROFILES VII. THE ROLE OF INDUSTRIAL POLICIES IN GVCS VIII. THE PRIMARY PRODUCT BATTLEGROUND: BRAZIL'S        SOYBEAN EXPORTS TO CHINA IX. INFRASTRUCTURE GROWTH IN ELECTRONICS: FOXCONN IN        BRAZIL X. BEYOND "PICKING WINNERS" IN BRAZIL XI. AN ALTERNATIVE MODEL: MEXICO'S OPEN ECONOMY XII. A NEW ROLE FOR REGIONAL INTEGRATION XIII. DIFFERENTIATING BETWEEN LARGE AND SMALL        ECONOMIES XIV. POLICY CHALLENGES IN BRAZIL CONCLUSION 

I. GLOBAL VALUE CHAINS AND EMERGING ECONOMIES

Globalization has given rise to a new era of international competition that is best understood by looking at the global organization of industries and the ways in which countries rise and fall within these industries. (1) The global value chain (GVC) framework has evolved from its academic origins to become a major paradigm used by a wide range of international organizations, such as the World Bank, the World Trade Organization (WTO), the International Labor Organization (ILO), and the U.S. Agency for International Development (USAID). Using core concepts like "governance" and "upgrading," GVCs highlight the ways in which new patterns of international trade, production, and employment shape prospects for development and competitiveness.

GVC analysis documents the international expansion and geographic fragmentation of contemporary production networks and focuses primarily on the issues of industry (re)organization, coordination, governance, and power in the chain. (2) Its concern is to understand the causes and consequences of the organizational reconfiguration taking place in global industries. (3) The GVC approach also explores the broader institutional context of these linkages, including trade policy, regulation, and standards.

In the past two decades, profound changes in the structure of the global economy have reshaped global production and trade and have altered the organization of industries and national economies. (4) As supply chains become global in scope, more intermediate goods are being traded across borders, and more imported parts and components are being integrated into exports. (5) In 2009, world exports of intermediate goods exceeded the combined export values of final and capital goods for the first time, representing 51% of non-fuel merchandise exports. (6) Because of the unique ability of the GVC framework to show how international supply chains link economic activities at global, regional, national, and local levels within particular industries, international organizations such as the United Nations Conference on Trade and Development (UNCTAD), the World Bank, the World Economic Forum, and the Organisation for Economic Cooperation and Development (OECD) are utilizing the GVC approach to structure new donor initiatives and data collection programs on global trade and development. (7)

Emerging economies are playing significant and diverse roles in GVCs. (8) During the 2000s, they became major exporters of intermediate and final manufactured goods (China, South Korea, and Mexico) and primary products (Brazil, Russia, and South Africa). However, market growth in emerging economies has also led to shifting end markets in GVCs, as more trade has occurred between developing economies (often referred to as South-South trade in the literature), especially since the 2008-09 economic recession. (9) China has been the focal point of both trends: it is the world's leading exporter of manufactured goods and the world's largest importer of many raw materials, thereby contributing to the primary product export boom.

II. THE RISE OF GVCS

In the 1970s and 1980s, U.S. retailers and brand-name companies joined manufacturers in the search for offshore suppliers of most categories of consumer goods, which led to a fundamental shift from what had been "producer-driven" commodity chains, which include capital- and technology-intensive industries like automobiles and electronics, to "buyer-driven driven" chains, which include a broad range of consumer products like apparel, footwear, toys, and sporting goods. …

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